How much state ownership do hybrid firms need for better performance?

Hybrid ownership-sharing partial business ownership with the state-is a new form of political connections that entrepreneurs in developing countries may employ to improve their access to key resources. This study investigates hybrid ownership as a strategic decision of entrepreneurs running small businesses in Vietnam-a transition economy. Utilising the resource dependence theory and legitimacy viewpoint, we propose and evidently show that increased state ownership in hybrid firms leads to improved performance. However, increasing state ownership beyond a minority share threshold harms firm performance due to the presence of agency costs. Also, the involvement of the state in firm governance reduces the benefits gained from having state ownership